OREANDA-NEWS. Liechtensteinische Landesbank AG: Interim net profit rises to CHF 44.2 million.
  • Earnings in client business were robust, the low level of interest rates had an adverse effect.
  • Operating expenses were reduced again, falling to CHF 109.1 million.
  • Business volume stood at CHF 55.7 billion; the sale of swisspartners group and exchange rate factors caused a decline.
  • With a tier 1 ratio of 20.0 percent, the LLB Group stands for safety and stability.

"By the end of 2015, we will have completed our repositioning. Our structural adjustment has been successfully concluded, costs and complexity have been substantially reduced, efficiency and profitability have risen significantly", summarized Group CEO Roland Matt. "In spite of the exceptionally low level of interest rates, we have again improved our operative performance and achieved a pleasing increase in profit."

Sale of swisspartners

With the sale of the swisspartners group, the LLB Group has set an important milestone in the implementation of its Focus2015 strategy. The Group’s intention to concentrate on its core business, which it has worked towards since 2012, has now been achieved. The sale caused a reduction in assets under management of CHF 3.3 billion and in the balance sheet total of CHF 1.3 billion. The sale had a positive impact amounting to CHF 9.2 million on the 2015 interim financial result.

Good operative performance

Group net profit rose in the first half of 2015 to CHF 44.2 million, corresponding to an increase of 9.2 percent in comparison with the previous year (first half 2014: CHF 40.4 million).

Operating income fell in the period under report by 8.0 percent and stood at CHF 156.5 million (first half 2014: CHF 170.1 million). However on a comparable basis with the previous year,? with the previous year’s figures adjusted to consider the sale of swisspartners group ? operating income would have risen by 1.9 percent.

Robust earnings in client business

As expected, the Swiss National Bank’s decision to stop supporting the minimum exchange rate of the Swiss Franc to the Euro and to introduce negative interest rates, had an adverse impact on interest business. Interest income before credit loss expense was down by 5.7 percent to CHF 64.9 million (first half 2014: CHF 68.8 million), largely as a result of higher interest rate hedging costs. Interest earnings from client business remained stable at CHF 68.5 million. The sale of the swisspartners group caused a fall in net fee and commission income of 18.6 percent to CHF 75.5 million (first half 2014: CHF 92.8 million). However on a comparable basis with the previous year, income would have remained stable thanks to intensive market-focused efforts.

Net trading income climbed substantially to CHF 11.1 million (first half 2014: minus CHF 19.3 million). Client trading in foreign exchange, foreign notes and precious metals rose by 48.2 percent to CHF 21.6 million. The LLB Group benefitted here from higher exchange trading volumes following the removal of the minimum exchange rate for the Euro. As in the previous year, falling interest rates led to unrealised book losses with interest rate hedging instruments of CHF 10.5 million on the reporting date. Net income from financial investments at fair value through profit and loss amounted to minus CHF 2.1 million (first half 2014: plus CHF 20.1 million).

Cost targets will be attained

The LLB Group has continued its policy of strict cost management. Accordingly, operating expenses decreased by 15.7 percent to CHF 109.1 million in relation to the previous year. On a comparable basis the decrease would have amounted to 8.1 percent. Personnel expenses fell to CHF 64.3 million (first half 2014: CHF 80.0 million). At 30 June 2015, the LLB Group had 812 full-time positions (31 December 2014: 893). General and administrative expenses stood at CHF 30.5 million (first half 2014: CHF 33.7 million). Consequently, the LLB Group will fall below the targeted operating costs of CHF 240 million specified in the Focus2015 strategy.

The Cost-Income-Ratio amounted to 73.8 percent (first half 2014: 78.2 %). Adjusted to consider the market effects of interest rate swaps and price gains, it would have stood at 64.6 percent (first half 2014: 65.7 %).

New money inflows in the strategic growth markets

As at 30 June 2015, assets under management at the LLB Group amounted to CHF 45.0 billion (31 December 2014: CHF 50.2 billion). The decline was attributable to the sale of the swisspartners group (minus CHF 3.3 billion) and exchange-rate-related factors (minus CHF 2.1 billion).

In the strategic growth markets of Central and Eastern Europe as well as the Middle East the LLB Group posted net new money inflows of CHF 95 million. In the onshore markets, isolated large outflows with custodian bank funds adversely weighed on inflows achieved with private and corporate clients. As was expected, money outflows were registered in the traditional cross-border markets, although this development has slowed. In total, the LLB Group posted net new money outflows of CHF 166 million in the first half of 2015 (first half 2014: outflow of CHF 651 million).

Mortgages increased by 0.6 percent to CHF 9.4 billion (31 December 2014: CHF 9.3 billion). In total, loans remained stable at CHF 10.7 billion (31 December 2014: CHF 10.7 billion).

Strong capital base

As per 30 June 2015, the consolidated balance sheet total stood at CHF 19.5 billion (31 December 2014: CHF 20.8 billion). The decrease is due to the deconsolidation of the swisspartners group. With equity capital of CHF 1.7 billion, the LLB Group possesses a high level of financial stability and security. The tier 1 ratio stood at 20.0 percent (31 December 2014: 18.3 %). The increase was due to the sale of the swisspartners group, the decline in balances due from banks and the new CRD IV / Basel III criteria. The return on equity attributable to the shareholders of LLB rose to 5.2 percent (first half 2014: 4.7 %).

Key figures at a glance

  First half 2015 First half 2014 Change in %
Operating income (in CHF millions) 156.5 170.1 -8.0
Operating expenses (in CHF millions) -109.1 -129.4 -15.7
Group net profit (in CHF millions) 44.2 40.4 9.2
Net new money inflow (in CHF millions) -166 -651  
RoE (annualised in %) 5.2 4.7 0.5 pp
Earnings per share (in CHF) 1.48 1.35 9.4
Cost-Income-Ratio (in %) 73.8 78.2 -4.4 pp
       
  30 June 2015 31 December 2014 Change in %
Tier 1 ratio in % 20.0 18.3 1.7 pp

Business volume (in CHF billions)

Assets under management (in CHF billions)

55.7

45.0

60.9

50.2

-8.6

-10.3
Loans (in CHF billions) 10.7 10.7 -0.4
Total assets (in CHF billions) 19.5 20.8 -6.1

Successive reduction of volatility in the income statement

At the LLB, the financial accounting of the changes in market value of interest rate hedging instruments and financial investments in accordance with the International Financial Reporting Standards leads to major fluctuations in the income statement. In order to consistently reduce this volatility and to enhance the transparency of its operative performance, LLB Group will implement two measures. Firstly, new interest rate swaps will be reported as hedge accounting, and secondly, changes in the value of new financial investments in the bond portfolio will be recognised in equity.

Outlook

Assuming that market interest rates and exchange rates remain constant until the end of 2015, the LLB Group expects net profit for the current year to be at the level of the previous year.

Strategy 2020

"The repositioning of the LLB Group with the Focus2015 strategy will be completed in four months. We are currently working on planning the 2020 strategy, and thus on our strategic positioning for the next five years. We are well on course to meet and master the challenges of the next phase from a position of strength and to exploit the room for manoeuvre that we have created," said Roland Matt, CEO of the LLB Group. "We believe we will be able to provide information about our strategic positioning in the next five years, and also about our new financial objectives by the time of the Investors Day at the LLB Group on 29 September 2015."